1. Summary
Proposal for Inverse Finance DAO to cover operations of the Product Working Group (PWG) in season 3, running from November 1, 2024 to April 30, 2025.
2. PWG @ Inverse Finance
The core responsibility of the Product Working Group is the design, development, deployment and maintenance of Inverse Finance smart contract systems and associated interfaces.
The transition to a fully empowered PWG started with Proposal 100, which established the Product Working Group multisig and gave it funding to pay for ad-hoc auditing work.
The product life cycle at Inverse Finance typically go through the following steps:
- Ideation of new product or feature for existing product.
- Evaluation of the idea across the entire team of core contributors.
- Design and specification of the idea.
- Review of the specification.
- Development of necessary code to support the idea.
- Testing of the new product or feature.
- Review of the new product or feature both internally and externally.
- Deployment of the new product or feature.
- Maintenance of the new product or feature.
The core contributors of the product working group take a deep part in all of these steps, and fully own accountability for steps 3-8. Part of that ownership is not just to execute on the tasks, but to make sure that it’s being done in a manner that maximizes security of the developed systems.
2.1 Season 2 in review
Security
The biggest oversight of season 2 was the premature launch of sINV and the following re-launch. While no user funds were lost, and the issue caught quickly, it led to deep introspection of our security process which is currently being reworked to include more review throughout the development process and better testing.
Product Goals
sINV:
Despite a rocky start, sINV was delivered and has seen repeated maxing out of the deposit cap, leading to a promising start for our auto-compounding INV vault. Over time we see sINV provide a steady INV buy pressure, as increased DBR demand will result in higher priced and larger DBR emissions, which in turn will be used to buy more INV.
Cross-chain sDOLA and sINV:
Cross-chain sINV is on the doorstep of being deployed, with sDOLA unfortunately needing to wait for CCIP permissionless self-serve to open up. It took longer to develop these products than we hoped for, primarily due to needing Chainlink’s permission and communication to deploy. However, the finished product will allow us to increase DOLA and INV demand across any network where the CCIP bridging protocol exists, along with serving as a governance proxy for our on-chain governance.
FiRM:
FiRM had a difficult start to the season with liquidation worries around CRV casting a shadow on our biggest markets. It eventually concluded with large liquidations that FiRM handled beautifully, but which cut our TVL in half. Nonetheless, the team has steadily increased DOLA demand and added enticing new markets to FiRM over time slowly grinding up TVL and outstanding borrows. Now we’re on the cusp of launching a market that will likely break all previous FiRM records.
FiRMv2:
The scope of FiRMv2 has grown during development. Initially the plan was to sand off the rough edges of our current markets while improving low hanging fruits, while keeping functionality more or less the same. The scope for this project has increased, even if it meant delays and internal debate of exactly how to best achieve it. In the new vision for FiRMv2, variable rate lending at DBR market price will be available as well as the fixed rates. This opens FiRM and DBR demand up to a whole new class of borrowers. An internal prototype of this has been built, but there’s still optimization and testing to be done before it can be sent off to final audit and be deployed.
Process
A problem we identified when discussing season 2 performance was a lack of ownership of individual tasks, features and products. This resulted in two negative outcomes:
- A lack of responsibility and accountability for deliverables. This can result in confusion about who’s moving a task forward and a lack of incentive for individual contributors.
- A lack of ability to push forward with a solution when there’s internal disagreement. A problem with requiring rough consensus on all decisions is that debate often moves painstakingly slow. The person most invested in finding the solution not only has to execute on that solution, but also invest time in convincing other contributors that the solution is the preferred way to go.
2.2 Goals
With Inverse Finance well on its way to eliminate the bad debt DOLA debt, the goal of the PWG in S3 will be squarely to improve revenue and profit margins as much as possible. To accomplish this we’re going to bring both improvements to our current offerings and foray into new product verticals. The specific improvements will be mentioned under the Projects section of this post.
A goal for season 3 specifically is to increase the accountability of contributors. To achieve this goal the PWG will attach a product owner to each dev task and project moving forward. They will bear the ultimate responsibility for shipping the deliverable with speed and security, while also having the last say on how to achieve this. We hope to increase our shipping speed by pushing this.
As for increasing revenue and margins, the PWG will maintain the security and usability of our current product offerings, along with:
- Deliver on projects mentioned in the 2.4 Projects section.
- Expand the selection of attractive FiRM markets
- Expand DOLA, sDOLA and sINV to networks with attractive opportunities
2.3 Responsibilities:
- Hosting and maintaining https://www.inverse.finance/
- Offering best in class transparency dashboards for applicable Inverse products.
- Integrate with third-parties technology solutions
- Develop and implement new types of escrows for FiRM unlocking new collaterals
- Expansion of new Feds to ensure the efficiency and availability of DOLA liquidity.
- Continuously improving our product development process both in terms of transparency, security and productivity.
- Innovation and delivery of new utility for the Inverse Finance DAO
- Assure product security by:
- Stress testing internal systems and checks
- Continuous built out of testing suites
- Continuous engagement with high-quality 3rd party code quality & security consultants
2.4 Projects
Along with the incremental improvements of products and systems, the PWG plans three major releases for season 3:
FiRM v2:
The plans for FiRM v2 expanded in scope during season 2, and turned from incremental improvements into a step change. The big new feature for FiRMv2 will be the ability to lend at variable rates as well as fixed rates, while still paying the current market price for DBR. This opens up a whole new vertical for FiRM borrowing, that we believe will spur increased demand as well as simplifying borrowing for less sophisticated users.
Stand-Alone FiRM website
As part of implementing a simpler UX, a new stand-alone website exclusively dedicated to FiRM is needed. This standalone presence can allow us to experiment more freely with design and usability, multiply SEO, and provide FIRM-only navigation and content that may be not consistent with current inverse.finance design. The existing inverse.finance website was launched nearly four years ago and the site has expanded to include a growing number of pages including governance, transparency and pages about old products and side products, etc. which can make the experience overwhelming for first-time visitors.
In-house Auto-compounder:
The most obvious way to generate revenue from FiRM is to increase borrowing demand. Higher demand means higher DBR prices which means more earnings for INV holders. However, an unexplored avenue is to monetize the collateral itself while benefiting our borrowers. We already have very successful markets on FiRM that allow users to generate yield, and some markets that implement auto-compounding through yearn vaults. There’s no reason for Inverse Finance not to capture that value itself, by implementing its own auto-compounding vault smart contracts.
FiRM on Superchain
As borrow capacity increases in the bull market and fees follow along, we hope to experiment with launching FiRM on the superchain stack. The redesign of FiRMv2 along with our work with Chainlink’s CCIP bridge is likely to make future L2 deployments little more than a turn-key solution.
INV Incentives update
Incentive alignment between DAO contributors and token holders is essential. Good incentives super charge organizations while bad incentives destroy them. For season 3 we plan a contributor-wide rethink of how we do INV incentivization in a way that incentivizes Inverse Finance DAO contributors to create maximum utility for INV holders.
Project USD2 and other non-DOLA scaled projects
DOLA and FiRM are great projects, but they both suffer from only being able to scale with DOLA demand. As the bad debt comes down DOLA demand naturally becomes easier to scale, yet it will always be limited by needing to keep DOLA pegged to $1. While still being prototyped, the project codenamed as USD2 is one of our projects currently exploring scaling Inverse Finance opportunities in ways that are unbounded by DOLA demand. Similarly, we’re constantly evaluating other ideas that may benefit or synergize with the current Inverse Finance products in ways that scale similarly unbounded.
2.5 Success Metrics
The PWG will measure its success in the following ways:
No major security incidents or major bug bounty payouts.
Security is an ingrained part of the process at Inverse Finance, and we hold ourselves to the highest standards of the industry. Not only do we consider major security incidents that cause a loss of funds a failure, but even the discovery of a failure mode in deployed code that isn’t exploited or activated, is considered a failure of our process as well. We will measure success in this area by the amount of high impact bugs and high payout bug bounties. We aim for 0 on both.
Adoption of new functionality.
It’s not only important to build secure products, but also useful ones. A clear metric for success for the PWG is how much our products are used. This is primarily measured as revenue growth for the DAO, and TVL growth, with revenue growth being more of a lagging indicator and TVL growth being more of a forward looking one.
2.6 Decision Making Power
The PWG will reserve the power to pursue product opportunities as they become apparent. While we plan on delivering on the projects as outlined earlier, the crypto space is a dynamic one, and we may find a golden opportunity that will take precedence on execution.
The PWG will maintain its role as the “Gas Clerk” of cross L2 governance contracts. This privileged role only has the power to set parameters related to transaction execution, and cannot operate any underlying business logic. The PWG will request the authority to maintain servers hosting the Inverse Finance website, along with write access for its members to the public github code repository associated with Inverse Finance.
Budget
Season 2 expenditures
While a hiring budget was asked for to hire additional engineering capacity, this budget was only to be spent if the right exceptional talent was found. No such talent was found and as such the additional hiring budget remains unspent.
| S2 $DOLA allowance | S2 $DOLA spent | S2 $INV allowance | S2 $INV spent | |
|---|---|---|---|---|
| Contributors | 246,000 | 246,000 | 0 | 0 |
| Ad Hoc & Tooling | 10,000 | 2081.25 | 210 | 66.74 |
| Hiring Budget | 60,000-87,000 | 0 | 0 | 0 |
| Total | 316,000-343,000 | 248,081.25 | 210 | 66.74 |
2. Contributors
Contributors will be active within PWG, to be paid as follows.
| Name | FTE | Band | Pro-rata Monthly Salary | Total for Season 3 |
|---|---|---|---|---|
| 0xMT | 1 | A | 14,500 | 87,000 |
| theAlienTourist | 1 | A | 14,500 | 87,000 |
| Nour | 1 | A | 14,500 | 87,000 |
| Tabboz | 1 | B | 12,000 | 72,000 |
| Total | 4 | 55,500 | 333,000 |
0xMT [WGL]
While initially on-boarded as a smart contract engineer, 0xMT has since taken on increasing amounts of responsibility, driving improvements to the internal security and product development process, along with taking part in protocol design and business strategy discussions. His expertise in both maintaining and further developing Inverse Finance smart contract systems along with his importance in driving the internal product development, makes him a crucial contributor.
theAlienTourist
Thealientourist has been with the Inverse Finance DAO for a long time, and is the backbone of all things user facing. His contributions make sure that our web front-end and back-end operates without a hitch, that we integrate with some third-parties (Zapper, Defillama, etc), and he lends his expertise to review of smart contract code and business logic as well. Without him, all user facing logic would grind to a halt.
Nour
Nour is the founder of Inverse Finance DAO and has demonstrated his ability as a builder multiple times. He has expressed his interest to devote his full attention to making Inverse Finance one of the biggest players in the stablecoin space and beyond, and has multiple product ideas cooking already. Bringing him on as a fulltime engineer creates the incentive necessary to have him built on behalf of Inverse Finance, rather than starting new ventures.
Tabboz
Tabboz continues to deliver value to the DAO, having been the driving force behind the feed redesign and pushing new markets to FiRM. He fits well into the decentralized, fully remote culture of the development team and has only gotten more productive over time. He has previously delivered flagship features like the ALE.
3. 3rd Party Review
| Details | Type | Requested $INV | Requested $DOLA |
|---|---|---|---|
| External expert review | Security | 400 | 10,000 |
Part of the Inverse Finance DAO product development process is continued learning and improvement, and one of the key parts of that has been engaging with 3rd party smart contract development domain experts. For season 3 we plan on adding additional reviewers, both to be able to add more stringent review of more critical code as well as being able to choose the best reviewer for the job.
The agreed upon rate is $225/hour, either paid 50% in DOLA and 50% in INV tokens or purely in DOLA.
4. Summary
In summary PWG requested the following budget for the 6 months of Season 1.
| S3 $DOLA allowance | S3 $INV allowance | |
|---|---|---|
| Contributors | 333,000 | |
| 3rd Party Review | 10,000 | 380 |
| Total | 343,000 | 380 |